South Korea's won strengthened to its highest level against the dollar in two years on Monday, climbing as much as 0.8% to 1,333.30 before paring gains to 0.5%. The currency's rise came as the benchmark KOSPI index plunged more than 3%, wiping out roughly 162.7 trillion won (about $108 billion) in market value.
The tech-heavy KOSDAQ fell 4.29% to 853.98. Market heavyweights SK Hynix and Samsung Electronics dropped 3.81% and 3.63%, respectively, closing at 1.617 million won and 252,500 won.
Foreign selling and the buyback wind-down
Foreign investors sold a net 458 billion won in KOSPI shares by 9:55 a.m., according to exchange data. The selling pressure has been building since early October. Samsung is down 7.68% since October 7, while SK Hynix has lost 7.23% over the same period.
Part of the recent weakness stems from the end of a major source of support: Samsung and SK Hynix are winding down share buybacks worth a combined 55 trillion won. Analysts say those programs had propped up the KOSPI for months. With the buybacks finishing, the market is losing a reliable bid.
AI stocks and Middle East tension
Traders pointed to two overlapping concerns. First, escalating tensions in the Middle East have rattled global risk appetite. Second, and more specific to Korea's chipmakers, there are growing worries that AI-related stocks have become overheated after a massive run-up this year.
Despite the recent pullback, SK Hynix is still up 138.85% year-to-date, and Samsung has gained 96.5%. The scale of those gains explains why even a modest reassessment of AI demand can trigger sharp selling.
The selloff comes just days after Samsung estimated a record operating profit of 107.4 trillion won in its preliminary third-quarter earnings announcement on October 8. That figure, while impressive, may have raised expectations to levels that are hard to sustain.
The won's unlikely turnaround
The won's strength is a separate story. It has appreciated 7.7% since January, transforming from Asia's worst-performing currency in the first half to its best in the second half. Strong exports and corporate dollar selling have driven the rally.
Min Gyeong-won, an economist at Woori Bank in Seoul, said the won is strengthening in line with broad dollar weakness, as the euro, pound, and yen all gain on lower oil prices. Min added that exporters' dollar sales, particularly from chipmakers, should keep supporting the won, though those flows were light on Monday.
That last point matters. If chipmakers' dollar conversions slow because of the stock selloff or global uncertainty, the won could lose some of its recent momentum. For now, the currency is trading near levels not seen since late 2022.
What to watch
Investors will be looking for any sign of stabilization in AI-related names and any further commentary from the Middle East. Samsung's full third-quarter results, due later this month, will also be scrutinized for clues about chip demand and capital spending plans. The buyback wind-down is complete, so the market will have to find its footing without that support.
